Stop & Shop, Giant-Landover Facing the Competition

MARK HAMSTRA

ANALYSTS AND OBSERVERS give Stop & Shop and Giant-Landover a lot of credit for the work they've done to reverse the sales slippage they started to experience a few years ago.

Giant of Landover faces ever-increasing competition from the likes of Wegmans, Food Lion and Harris Teeter.

The gains have come amid increasing competition in those markets from some savvy retailers — although analysts also attribute some of the recent strong performance at Stop & Shop to the weakness at Supervalu's Shaw's banner in New England.

“Probably the one big advantage for Stop & Shop is that Shaw's is not structurally lowering prices,” said Patrick Roquas, an analyst at Rabo Securities, Amsterdam. “The company has been doing some more promotional campaigns, but not really price reductions.”

John Rand, director of retail insight-grocery at Cambridge, Mass.-based Management Ventures Inc., noted that Shaw's “tends to follow rather than lead on pricing.”

He added that Stop & Shop's skill at tailoring prices by store has been a tremendous asset in the battle for share in the market.

“Stop & Shop is very adept at store-specific pricing, so they can cut prices at a particular store if they need to,” he said. “They don't need to cut prices chainwide if they don't have to, so they are able to get a value improvement without necessarily a massive reduction in their own margin.”

Stop & Shop is also holding its own against key independent chains, and is regaining some business that Big Y gained when that Springfield, Mass.-based operator added stores in Stop & Shop's areas, said Burt Flickinger III, managing director, Strategic Resource Group, New York.

He said Stop & Shop's skill at price cutting is expected to come in handy as more Wal-Mart Supercenters enter the market.

“Stop & Shop is positioning itself against Wal-Mart's Project Impact supercenter tsunami,” he said, referring to the remerchandising effort under way at the Bentonville, Ark.-based discount giant.

Giant of Landover has had more exposure to aggressive competition — Wegmans Food Markets, Food Lion and Harris Teeter have all recently expanded in Giant's markets — which analysts said explains both why Giant's sales suffered more in recent years and why that banner has now undertaken a more comprehensive remodeling program called Project Refresh.

“They are going to have to put their best foot forward, because competition there is getting more energetic,” noted Rand of MVI.

Flickinger said the past experience of Carl Schlicker, the president and chief executive officer of Stop & Shop and Giant-Landover, at running the chain's sister banner, EDLP operator Giant of Carlisle, Pa., should serve the chains well.

“Carl Schlicker is a great executive team leader wherever he goes in the food industry,” he said. “He's been able to take a company with a premium price perception and has been able to sustain Stop & Shop and Giant's salient strengths of better quality and service.

“It's the No. 1 food and pharmacy operator in its markets, leading the way with offers like low-price 30- and 90-day prescription plans and free antibiotics. It has the most productive pharmacies, a very strong fresh-product perimeter, and now combines that with high quality and very competitive prices.”